The Impact of Environmental Protection Investment and Equity Balance Degree on Economic Performance and Eco-Autonomy: An Empirical Study of China’s A-Share Listed Companies

Abstract

Enterprises are not only the main source of energy consumption and pollution emissions but also a key force in environmental governance. There is no doubt that the positive impact of enterprise environmental protection investment (EPI) on other stakeholders, but the impact on its own economic performance is the key to determining the scale of EPI and increasing the motivation for Eco-autonomy. This paper selects 691 companies listed on China’s A-share market from 2012 to 2022 as research samples, introducing the equity balance degree as the moderator variable, and empirically investigating the impact of the relationship by using a panel multivariate regression model. The results show that the relationship between EPI and its economic performance is a U-shaped curve, and it is related to Eco-autonomy. The equity balance degree can mitigate the negative influence of the relationship, but it is significantly different between state-owned enterprises and private enterprises. Accordingly, it prompts the following policy implementation: the Chinese government should develop differentiated environmental incentives and regulatory policies. It should focus on private enterprises with high-equity balance degrees and high pollution levels, and it should encourage state-owned enterprises to increase the scale of ex ante preventive investment through policy incentives.

1. Introduction

In recent years, the greenhouse effect, global warming, and the drawbacks of a high-carbon economic development model have gained enormous global attention. The green low-carbon economy and ecologically sustainable development have become the common choice for the development of modern society. Nowadays, China’s economic development has fully stepped into a period of high-quality development, and the green economy has become an important area of China’s economic development [1]. According to the ESG (Environmental Social Governance) investment concept and enterprise evaluation standards, as well as the principle of “who pollutes, who governs, who develops, who protects” in China’s Environmental Protection Law, it is clear that the enterprise is one of the most important responsible parties of environmental protection. Meanwhile, the enterprise is also a major source of energy consumption and pollution emissions in China’s economy [2]. How to curb the enterprises that are the biggest polluters to take the initiative responsibility of environmental governance has become crucial in the development of China’s green economy. The process of Eco-governance can be simply summarized into three stages: “environmental pollution—government governance—Eco-autonomy” [3]. Eco-autonomy is a brand-new concept. It is the advanced stage of Eco-governance and environmental protection, which requires enterprises to effectively assume the main responsibility of environmental protection and pollution control by self-driven force. It can not only effectively reduce the pollution level of the environment but also alleviate the huge financial pressure on the government’s ecological governance. The success of the Rhine River Governance Action demonstrates that some European countries have already completed the transition from the primary to the advanced stage of ecological governance [4]. The examples of Bayer Group and Henkel Corporation, which are located on the riversides of the Rhine, are typical examples of Eco-autonomy. They have played an active role in reshaping the ecological environment of the Rhine. It proves that some countries in Western Europe, such as Germany, are already taking the leading edge in the ideal state of Eco-autonomy [3]. However, due to the characteristics of environmental protection investment, such as “large investment, slow effect, lack of explicit investment income”, Chinese enterprises often lack enthusiasm for environmental protection investment [5,6]. It leads to greater difficulties in achieving the desired state of Eco-autonomy. The key to solving the problem of enterprises’ low willingness to invest in environmental protection lies in how to enable enterprises to achieve growth in their economic performance while undertaking the main task of environmental governance. Therefore, it is important to guide enterprises to correctly understand the way, level, and degree of environmental protection investment on their economic performance. It is not only conducive to stimulating the enthusiasm of Eco-autonomy, but it is also conducive to promoting the development of social Eco-civilization and the effective transformation of a low-carbon economy and green society.

At present, environmental protection investment (EPI) is a key driver in promoting the high-quality development of the low-carbon economy. It has attracted extensive attention from the academic community. Existing research results on EPI are quite rich; it is mainly focused on social responsibility [7], investment liberalization [2], environmental decentralization [8], government or business-led mode [9], green technology innovation [10], environmental regulation [11,12], input–output perspective [13], political and law aspect [14,15], financial performance [16], shareholder value [17], enterprise life cycle [18], enterprise competitiveness [19,20], comprehensive evaluation [21], and particular industry studies [12,22,23]. Regarding the research on the relationship between EPI and its economic performance, it is generally recognized that there is an obvious correlation effect, but there are still some limitations in the research conclusions. Firstly, there is still no uniform conclusion about the direction of the impact. Different scholars have different conclusions, including positive [16], negative [24], and non-linear research conclusions [25]. The reason is mainly due to the fact that different scholars have large differences in the industry scope, different areas and countries, classification criteria for selecting samples, and the time span of the studies. Secondly, due to data limitations and the fact that it is not easy to measure micro-environmental behaviors, most studies have used different variables for environmental management in the research. Related studies in the United States and France focus mainly on socially responsible performance, while studies in Germany and Japan are more concerned with the regulation of pollutant emissions, while studies in China are generally more concerned with the relationship between the intensity of environmental regulation and EPI [16,25,26,27,28]. In terms of the selection of research variables, most existing studies set the environmental performance (pollutant emissions, environmental ranking, climate change, etc.) as the independent variable. For the moderating variables, most of the existing studies adopted government subsidies, media attention, technological innovation, management shareholding, etc. [26,27,28]. However, environmental performance is a response to the actual results achieved by the enterprise’s EPI, which is subject to the combined influence of internal and external factors. In some cases, it cannot fully reflect whether all the efforts made by the enterprise in environmental protection have contributed to the growth of its economic performance [20]. Specifically, environmental performance is affected by multiple factors such as internal resources, technology, management and external market, economy, competition, etc., which leads to a certain degree of difference in the impact of the enterprise’s EPI on its economic activities at different periods. In addition, EPI is a micro-level enterprise-specific behavior. Under the influence of different property rights structures, the attitude, degree, and way of EPI are changed by the influence of equity structure. Existing studies mostly start from the macro and industry levels [13]. It rarely examined the relationship from the perspective of equity distribution, which resulted in the findings not promoting the scale-up of EPI and the enhancement of self-driving force. Therefore, this study takes the data related to EPI and its economic performance disclosed by 691 A-share-listed companies in various industries in China from 2012 to 2022. We introduce the equity balance degree as the moderator variable and conduct a panel-data analysis of the whole industry samples from the perspective of equity allocation. A comprehensive consideration of the impact of the enterprise’s EPI on its economic performance is significant for further promoting the Eco-autonomous behaviors of enterprises.

The contribution of this paper is as follows: Firstly, it has studied the economic consequences of EPI from the micro level. It has enriched the research results of externality theory, social responsibility theory, and sustainable development theory in the field of EPI studies, and it provided Chinese evidence for “Porter’s hypothesis”. Secondly, this paper empirically tested the “U” curve relationship, and the promotion effect of ecological autonomy by crossing the inflection point. It provided empirical evidence and micro evidence to explain why Chinese enterprises lack self-drive in EPI. Thirdly, this paper is based on the equity structure of enterprises research, which fully considers the moderating effect of the equity balance degree. It makes the conclusions more reliable, which can provide a more effective reference for the government to formulate differentiated environmental regulations in the future. In short, this study is conducive to helping the government find a balance between promoting green economic development and economic growth, optimizing the allocation of financial resources, and formulating incentives that are beneficial to both enterprises and the environment; it is conducive to the digital transformation of enterprises and the application of green technologies and helps enterprises to better understand how EPI can be transformed into economic benefits; and it is conducive to raising public awareness of the value of EPI made by enterprises and encouraging more consumers and investors to support enterprises that actively fulfill environmental responsibilities and promote wide social support for green development.

2. Theoretical Background and Hypotheses

2.1. Influence of Enterprise’s EPI on Its Economic Performance

According to previous studies [29,30,31], the effect of EPI on its economic performance is multi-directional and complex. There is a significant difference in the impact effects of considering the different dimensions of a firm’s economic performance. For example, from the perspective of enterprise strategic planning, EPI is an effective tool for enterprises to create economic value, assume social responsibility, and achieve green transformation [8]. However, from the perspective of enterprise production and operation, it may crowd out productive inputs and lead to an increase in production costs in the short term. In addition, the types of EPI can be categorized into “ex ante preventive investment” and “ex post remedial investment” [11], and different types of investment have different effects on economic performance.

As shown in Figure 1, this study investigates the relationship from three different perspectives, including strategic management, production operations, and stakeholders, in combination with the type of investment and the timing of its effects. It explains the U-shaped relationship evolution in terms of inputs and returns, and it explains the negative and positive impacts by use of neoclassical economics, Porter’s hypothesis, ex post remedial investment, and ex ante preventive investment in order to provide a comprehensive explanation of mechanisms.

First of all, from the perspective of enterprise strategic management, enterprise strategic planning must be responsive to the development needs of the external environment and in line with the national strategic approach [7]. The Paris Agreement and China’s “dual-carbon” goal reflect the fact that a green and low-carbon economy is a major policy for the future development of countries around the world. However, in terms of internal management, companies are more inclined to maximize the benefits of short-term gainful behavior [32]. From the view of the enterprise’s development, EPI benefits technological innovation and competitive advantage [33], which can help enterprises realize the positive cycle of their own development and social responsibility. In addition, Porter’s Hypothesis states that technological innovation could offset the cost of environmental protection by increasing the productivity of the enterprise. And the first-mover advantage could improve the overall competitiveness of the enterprise [34]. It demonstrates the positive impact of firms’ EPI on their economic performance. However, it should be noted that technological innovation and first-mover advantage are mainly generated by the ex ante preventive investment, which has an obvious lag in the improvement of enterprise productivity. Because of the successful research and development in science and technology, the formation of first-mover advantages requires a large amount of capital investment and a certain amount of time. If the enterprise does not achieve the expected results of the EPI within a predetermined period, it may increase the business risk, which will bring a certain negative impact on its economic performance. Furthermore, Porter’s hypothesis focuses on the enhancement of the firm’s overall competitive advantage, which has obvious long-term effects and realization preconditions, but it does not imply the same positive effect on the firm’s economic performance.

Secondly, from the perspective of production and operation, EPI belongs to a kind of non-productive input, which may have a certain crowding-out effect on production in the short term [35]. In the view of neoclassical economics and internal control management, the firm’s economic performance emphasizes the occupation and output of internal resources, and EPI is essentially a kind of crowding-out effect on economic resources. That is to say, increased EPI by companies will reduce disposable resources, which will decrease their economic returns in the short term [36]. In China, enterprises often apply for environmental subsidies and tax incentives to compensate for the crowding-out effect of EPI and balance the economic performance [12]. According to the EPI information disclosed by Chinese enterprises, the scope of EPI mostly focuses on ex post remedial investment, i.e., the clean treatment of pollutant discharges, which results in the investment dividend brought by technological innovation, and the first-mover advantage may not be able to be quickly realized [37]. In addition, because of the strong externality of EPI and the inability to bring direct economic benefits in the short term, the shareholders of small- and medium-sized enterprises often have reservations about EPI decisions in China.

Thirdly, from the perspective of stakeholders, a good corporate reputation can satisfy the needs of different stakeholders, which could increase its market value [28]. However, when the cash amount of EPI disclosed by enterprises exceeds the psychological expectations of investors, it will damage the growth of economic performance [38]. In terms of long-term effects, enterprises can establish a good public image through EPI, and it demonstrates to society the strong capital and sustainable development ability of enterprises. This is not only beneficial to brand building and product sales but also helps enterprises to establish a long and solid partnership with the government, consumers, investors, upstream and downstream partners, and other stakeholders. However, in terms of short-term effects of EPI as a non-production operational investment, companies often tend to be more cautious in their input decisions. In addition, when the company’s EPI is too high, it will increase the perception of its investors, shareholders, and employees, as well as upstream and downstream companies of its business risks. They may believe that the return on their current year’s financial revenue may be reduced as a result [30].

In summary, it can be found that the relationship between EPI and its economic performance cannot be simply summarized as a positive or negative influence. The type of EPI with the time horizon should be considered comprehensively. In response to the debate over the positive and negative relationship, some scholars have proposed a non-linear conclusion of the relationship, which may explain the differences in the findings of previous studies. In detail, relevant scholars take different countries and industries as research objects and conduct research from different perspectives. The results show that the relationship may have inflection points, which should be a curved relationship. For example, a sample of U.S. firms was analyzed for a U-shaped curve relationship between corporate financial performance (ROA) and socially responsible performance (KLD social responsibility score) [25]. A sample of Japanese manufacturing companies was analyzed for a U-shaped curve relationship between corporate financial performance (ROA) and pollutant emissions [39]. A sample of French companies was analyzed for a U-shaped curve relationship between EPI and economic performance (ROA) [40], and a sample of Chinese coal companies was analyzed for a U-shaped curve relationship between EPI and environmental regulation [21]. Based on the results of previous research [37] and comprehensive consideration, this study concludes that the relationship between EPI and the economic performance of Chinese enterprises may have an inflection point, which should be a curvilinear relationship. It specifically should be expressed as a negative and then a positive curvilinear trend.

Based on the above analysis, this paper puts forward the competitive hypothesis 1.

H1: 

There is a “U” curve relationship between EPI and its economic performance.

2.2. The Moderating Role of Equity Balance Degree on EPI

To some extent, the investment behavior of enterprises is affected by the complexity of internal and external factors, and the optimal investment objectives are often difficult to achieve. According to previous research [41], the equity balance degree has a significant impact on business performance, and it helps to improve corporate governance. In summary, the equity balance degree is a model of equity arrangement that achieves mutual supervision of major shareholders through internal checks and balances. It significantly influences the investment and business decisions of corporations, including the decision-making of EPI. According to three major drawbacks of EPI (large investment, slow feedback, and lack of explicit investment income), it leads to significant differences in the attitudes of shareholders with different shareholdings to EPI [42]. From the perspective of large shareholders who own more resources and have higher exit barriers, and whose interests are more tightly bound to enterprise, their investment preferences are more focused on long-term sustainability and long-term return on investment. From the perspective of small shareholders, who own fewer resources and have lower exit barriers, their investment preferences are more focused on short-term dividends in a specific area or on business behaviors that can quickly provide them with short-term income. Unlike the investment attitudes of large and small shareholders, business managers are often motivated by personal performance and usually favor quick, short-term profits [43].

In the governance structure of a corporation, shareholders have a clear supervisory role over managers. Research has proven that larger firms, firms with greater free cash flow, and higher advertising outlays demonstrate higher levels of Environmental Protection Investment [44]. However, for small- and medium-sized enterprises, or private enterprises that are more cautious in their capital decisions, the influence effect of the equity balance is greater. When the equity balance degree is not high, the equity is relatively concentrated, and the benefits of corporate monitoring will exceed the cost of monitoring. Large shareholders will more effectively monitor the short-term business behavior of managers and will be more inclined to choose to increase EPI for the long-term interest. However, when the equity balance degree is high, the equity is relatively dispersed, and the corporate-monitoring benefits will be lower than the cost of monitoring. It is more difficult for shareholders to effectively monitor the short-term business behavior of managers, which tends to cause the amount of EPI to be relatively small. It can be seen that the equity balance degree has a significant impact and moderating effect on EPI and its economic performance. Based on this, this paper puts forward Hypothesis 2.

H2: 

Equity balance degree has a moderating effect on the impact of EPI on its economic performance. That is, the higher the equity balance degree, the greater the negative impact of EPI on its economic performance.

3. Methods and Data

3.1. Data Sources

This paper takes all A-share listed companies in China for 11 consecutive years from 2012 to 2022 as the research object and by the following principles: (1) Exclude sample companies with a listing time of less than 10 years. (2) Exclude companies in the financial industry. (3) Exclude ST companies and *ST companies. (4) Exclude companies with missing EPI information and other important factors during the observation period. (5) In terms of explanatory variables and control variables, companies with incomplete financial data are further excluded. Finally, a total of 691 sample companies and 7601 valid observations are obtained.

In addition, the main EPI data required in this paper were mainly obtained from CSMAR, which is the full name of the China Stock Market & Accounting Research Database. In order to eliminate the influence of outliers and to make the results of the study more reliable, anomalous data in continuous data with non-dummy variables are shrink-tailed at the 1% and 99% levels, respectively.

3.2. Measurement of Main Variables

(1)

Explained variables (Economic performance)

The measurement of enterprise economic performance can be mainly divided into two categories: One is to take the financial indicator measure, mainly for the return on total assets (ROA). The other is the market indicator measure, mainly for Tobin Q. According to the previous research [23], this paper takes the return on total assets (ROA) to represent the financial performance to measure the economic performance of the enterprise. The main consideration is that ROA can comprehensively respond to the overall revenue capacity, asset utilization, and economic management level of the enterprise. And it is more relevant to the equity structure, which can truly respond to the enterprise’s willingness to invest in the environmental protection area.

(2)

Explanatory variables (EPI)

The definition of environmental protection investment (EPI) can be specifically expressed as all the efforts made by the enterprise to protect the ecological environment, including all the inputs in green technology research and development, clean production, purchase and renovation of environmental protection equipment, pollution control, ecological protection, environmental management, publicity and education, etc. [8]. According to previous studies [24,25], this paper chooses to use the relative format of EPI, i.e., “Amount of environmental protection investment/operating income”, to describe the enterprise inputs in terms of EPI.

(3)

Moderating variable (Equity Balance Degree)

The equity balance degree is an important indicator to measure the stability of the company’s shareholding. It is also the core of the shareholding structure in corporate governance, and it is one of the key factors affecting the economic performance of the enterprise [45]. The lower the shareholding ratio of the enterprise’s first largest shareholder, the more dispersed the shareholding and the higher the equity balance degree. Therefore, this study takes the following method to calculate the equity balance degree: the ratio of shareholdings of two-to-five shareholders divided by the ratio of shareholdings of the first largest shareholder.

(4)

Control variables

In order to exclude the interference of other factors and control the impact of the firm’s characteristics, this paper has selected the size of the firm (Size), type of firm (Typ), nature of equity (State), age of the firm (Age), growth capacity (Growth), solvency (Lev), operating capacity (Oc), monetary funds (Cash), yearly variable (Year), and nature of the industry (Ind) as the control variables. The above variables and their definitions are shown in

Table 1. Variable definition.

Type	Name	Code	Variable Definition
Explained variable	Economic Performance	ROA	Return on total enterprise assets
Explanatory variable	Environmental Protection Investment	EPI	Amount of EPI/operating income
Moderator variable	Equity Balance Degree	EBD	The ratio of shareholdings of two-to-five shareholders/The ratio of shareholdings of the first largest shareholder
Control variable	The size of the firm	Size	Natural logarithm of total assets of the enterprise at year-end
	Type of firm	Typ	1 for heavy polluters, 0 otherwise
	Nature of equity	State	State-owned enterprises are assigned 1; Private enterprises are assigned 0
	Age of the firm	Age	Natural logarithm of the number of years the company has been listed
	Growth capacity	Growth	Growth rate of main operating income
	Solvency	Lev	Asset–liability ratio
	Operating capacity	Oc	Operating income/current assets
	Monetary funds	Cash	Money funds/total assets × 100%
	Yearly variable	Year	Annual dummy variable for the year in which the sample firm is located
	Nature of the industry	Ind	Industry dummy variable for the industry in which the sample firms are located

.

3.3. Model Design

Because EPI is required to go through the normal budget cycle with a build-up period, it also has a certain lag period on economic performance. It may lead to a large inaccuracy in contemporaneous considerations, which is one of the key factors that have led to the questioning of the Porter hypothesis by previous authors. Existing studies often take a direct look at EPI outcomes or lag behind by a number of periods. But this model takes a one-period lag because of shorter time costs and greater impact of a one-period lag. It overcomes some of the endogeneity problems, and the study is more accurate. With reference to previous studies [36,37], all data except EPI are lagged by one period in the model (1) to observe the lagged effect of EPI in order to improve the accuracy of the study.

In order to test the research hypotheses above, the model (1) was set up as follows:

ROA_i,t = β₀ + β₁EPI_i,t−1 + β₂EPI²_i,t−1 + β₃Size_i,t + β₄Typ_i,t + β₅State_i,t + β₆Age_i,t + β₇Growth_i,t + β₈Lev_i,t + β₉Oc_i,t + β₁₀Cash_i,t + ∑Year_i,t + ∑Ind_i,t + ε_i,t

(1)

In this model, β₀ is the model constant value, i represents sample firms and t represents year, ε_i,t is the residual value, and the other variable symbols are detailed in Table 1. If the EPI_i,t−1 coefficient β₁ is significantly negative and the EPI²_i,t−1 coefficient β₂ is significantly positive, it means that there is a “U” curve relationship between EPI and its economic performance. In addition, group analyses by state-owned versus private enterprise will be conducted in the later multiple regression study in order to explore the differences in the impact of the relationship.

Furthermore, in order to explore the moderating effect of the equity balance degree on economic performance in EPI, this study adds the equity balance degree (EBD) and the interaction term between EPI and balance degree, EPIB = EPI·(Div/Con), and the main effects regression model with centralization. This model has innovated the equity balances as the adjustment variable to analyze the impact of EPI on enterprise performance. Because the equity balance degree has an important impact on the EPI by influencing the allocation of resources and the direction of investment decisions, it plays a particularly important role in the investment decision-making and operation process.

Data centrality is a key component to ensure the correct interpretation of the interactions. Uncentralized data will increase multicollinearity, which can lead to a reduction or even disappearance of the contribution of some variables to the regression model. Additionally, there is some volatility in the initial EPI data and their squared term data. Therefore, EPI data need to be centralized.

Based on the above analysis, the moderating effect model (2) is obtained:

ROA_i,t = β₀ + β₁EPI_i,t + β₂EBD_i,t + β₃EPIB_i,t + β₄Size_i,t + β₅Typ_i,t + β₆State_i,t + β₇Age_i,t + β₈Growth_i,t + β₉Lev_i,t + β₁₀Oc_i,t + β₁₁Cash_i,t + ∑Year_i,t + ∑Ind_i,t + ε_i,t

(2)

4. Results

4.1. Descriptive Statistics

The results of the study are shown in

Table 2. Descriptive statistics for key variables.

Variable	Obs	Mean	Std	Min	Max	Median
ROA	7601	0.0400	0.0475	−0.108	0.201	0.0337
EPI	7601	0.264	0.466	0.000534	2.909	0.101
EBD	7601	2.951	4.102	0.0362	25.94	1.419
Size	7601	23.04	1.268	20.48	26.85	22.93
Typ	7601	0.397	0.489	0	1	0
State	7601	0.507	0.500	0	1	1
Age	7601	2.530	0.607	0.693	3.367	2.639
Growth	7601	0.138	0.285	−0.442	1.475	0.0957
Lev	7601	0.491	0.171	0.106	0.854	0.497
Oc	7601	1.439	1.209	0.0242	24.19	1.127
Cash	7601	0.150	0.0971	0.00231	0.798	0.129

, which specifically presents the descriptive statistics of the main variables for the full sample. The results show that the mean and median of the explained variable (ROA) are 0.0400 and 0.0337, with a standard deviation of 0.0475, which reflects that the sample data are less discrete and the profitability levels are more balanced. The mean and median of the explanatory (EPI) are 0.264 and 0.101, with a standard deviation of 0.466. The standard deviation is much larger than the mean and median, reflecting that there are significant individual differences in the EPI scale of the sample firms. And the level of EPI by most Chinese companies is still at a relatively low level.

Over the past 5 decades, China’s rapid economic development has brought serious environmental problems. The Chinese government has adopted a series of strict environmental protection policies. It is actually a command-and-control approach, i.e., the implementation of various environmental protection efforts is promoted through governmental decision-making and guidelines. As a result, China generally implements “command-and-control”-oriented environmental regulation now [12]. Due to the involvement of local governments in the investment and control of state-owned enterprises, state-owned enterprises are undertaking more social responsibility than private enterprises, which results in a relatively higher scale of EPI, participation, and commitment by state-owned enterprises than by private enterprises [46]. The choice of state-owned versus private enterprises as a subgroup study is due to the fact that the moderating effect of the equity balance degree is more significant in state-owned versus private enterprises. Before the 21st century, China’s market was dominated by state-controlled enterprises, but now, privately owned enterprises and diversified holdings are playing an increasingly important role in China’s market economy. In comparison with other countries, the Chinese economy is characterized by a distinctive state-owned enterprise. According to the data collected, the amount of data on EPI in state-owned enterprises is more voluminous and more dispersed than in private enterprises, and the gap between the role of shareholders in monitoring state-owned and private enterprises is more obvious. Considering the equity balance degree may have different impacts on enterprises with different equity natures. This study re-groups the sample according to the nature of equity for descriptive statistics, with State1 indicating state-owned enterprises and State0 indicating private enterprises. The results of the study are shown in

Table 3. Descriptive statistics of the main variables for the subgroup samples.

Variable		ROA	EPI
State 1	N	3857	3857
	Mean	0.0359	0.279
	SD	0.0438	0.482
	Min	−0.108	0.000534
	Max	0.201	2.909
	Median	0.0292	0.103
State 0	N	3744	3744
	Mean	0.0441	0.249
	SD	0.0506	0.448
	Min	−0.108	0.000534
	Max	0.201	2.909
	Median	0.0389	0.0995

, and the mean value of the EPI of state-owned enterprises and private enterprises is 0.279 and 0.249, respectively, indicating that the EPI of state-owned enterprises is slightly higher than private enterprises. The mean values of its ROA are 0.0359 and 0.0441, respectively, indicating that the impact of economic performance of state-owned enterprises is slightly lower than private enterprises. This may be related to the large “ex ante preventive investments” made by state-owned enterprises. Moreover, this study has shown that “ex ante preventive investment” has a certain degree of crowding-out effect on production. It is difficult to see significant improvement in economic performance in a short time. To further explore the impact of the introduction of equity balance degree by different types of enterprises, the subsequent study will continue to analyze the sample according to the nature of the enterprise’s shareholding in the regression analysis of the subgroup.

4.2. Correlation Analysis

Table 4. Pearson’s correlation coefficient for each variable.

Variable	ROA	EPI	EBD	Size	Typ	State	Age	Growth	Lev	Oc	Cash
ROA	1
EPI	−0.118	1
EBD	−0.0644	−0.00930	1
Size	−0.00170	0.0306	−0.0712	1
Typ	0.0597	0.0454	−0.0649	0.0152	1
State	−0.0866	0.0323	−0.249	0.261	0.0729	1
Age	−0.102	−0.00740	−0.0595	0.388	0.0605	0.370	1
Growth	0.276	−0.0592	0.0323	0.00800	−0.0169	−0.108	−0.114	1
Lev	−0.423	0.0338	−0.00210	0.482	−0.0666	0.157	0.272	−0.0115	1
Oc	0.0816	−0.0877	−0.0914	0.112	0.211	0.176	0.157	0.0279	0.0943	1
Cash	0.232	−0.160	−0.00810	−0.160	−0.103	−0.0302	−0.162	0.0284	−0.292	−0.209	1

shows the Person’s correlation coefficients between the main variables in the research model. The results show that there is a significant negative correlation between EPI and ROA. The correlation is generally consistent with the left-hand side of the “U” curve of Hypothesis 1, but the final result still needs to be further tested by the subsequent multiple regression analysis. For the issues of parametric correlation, i.e., Age—Size; Lev—Size; Lev—ROA, which is inevitable with a moderately close pairwise relationship, but it does not affect the quality of the model and the accuracy of the results. In addition, the study shows that the absolute values of the correlation coefficients between the main variables are less than 0.5, indicating that there is no serious problem of multicollinearity. Meanwhile, the subsequent studies will be further validated by VIF values.

4.3. Analysis of Multiple Regression

In this study, the VIF test and the White test were used after multiple regression in order to solve the problem of multiple covariance and heteroskedasticity that may exist in the correlation analysis. The statistical results show that the VIF values of the variables are less than 2, indicating that there is no multicollinearity problem in the regression equation. However, the White test found that there is a certain degree of heteroskedasticity in the regression model, and the “OLS + Robust Standard Error” approach was adopted to improve the precision of the research results.

4.3.1. Full-Sample Multiple Regression Analysis

Table 5. Regression results.

Variables	(1) ROA	(2) ROA
L.EPI	−0.00948 *** (−9.118)	−0.0175 *** (−6.463)
L.EPI2		0.00351 *** (3.209)
Size	0.0119 *** (24.73)	0.0119 *** (24.81)
Typ	−0.00170 (−1.167)	−0.00157 (−1.085)
State	−0.00603 *** (−5.469)	−0.00597 *** (−5.418)
Age	0.00302 *** (2.733)	0.00290 *** (2.625)
Growth	0.0445 *** (19.71)	0.0446 *** (19.74)
Lev	−0.148 *** (−39.38)	−0.148 *** (−39.48)
Oc	0.00391 *** (7.736)	0.00379 *** (7.502)
Cash	0.0586 *** (9.358)	0.0572 *** (9.123)
Constant	−0.184 *** (−18.18)	−0.183 *** (−18.09)
Year	Control	Control
Ind	Control	Control
Inflection point		2.493
Observations	6910	6910
R-squared	0.382	0.383

Robust t-statistics in parentheses *** p < 0.01. Inflection point: 0.0175 ÷ 0.00351 ÷ 2 = 2.4929.

specifies the results of the full-sample regressions of enterprises’ EPI on its economic performance. Column (1) calculates only the primary term relationship between EPI and its economic performance, and column (2) adds a quadratic regression of EPI (EPI²). The results indicate a significantly negative coefficient of the primary term of EPI at the 1% level, indicating that EPI, as a non-productive investment, does have a certain extent of a crowding-out effect, which reduces the economic performance of enterprises. However, after adding the EPI², the coefficients of the primary term of EPI and the coefficient of the secondary term of EPI² are negative and positive, respectively, at the 1% level, which indicates that there is a significant “U”-shaped curve relationship. At the same time, the study found that there is an obvious “inflection point” in the curve. When the scale of EPI is to the left of the inflection point, its economic performance decreases as the scale of EPI increases. However, when the scale of the EPI exceeds the inflection point, its economic performance improves as the scale of the EPI increases, partially verifying “Porter’s hypothesis” and fully validating Hypothesis 1 of this paper. That is, there is an inflection point between a firm’s EPI and its economic performance. The specific relationship is a negative, and then a positive, curvilinear trend. Additionally, according to Table 2, the mean EPI value is only 0.264, which is significantly difference from the inflection point of 2.493. It shows that the scale of China’s EPI will remain on the left side of the “U” curve for a longer period of time. The impact of EPI on its economic performance is still negative, and Hypothesis 1 of the study has passed the statistical test.

4.3.2. Multiple Regression Analysis for Grouped Samples

Table 6. Multiple regression analysis for grouped samples.

Variables	ROA
	State-Owned Enterprises	Private Enterprises
L.EPI	−0.0170 *** (−5.155)	−0.0192 *** (−4.571)
L.EPI2	0.00565 *** (4.722)	0.00170 (0.983)
Size	0.00941 *** (16.04)	0.0151 *** (18.43)
Typ	−0.00256 (−1.330)	0.00147 (0.714)
Age	0.00177 (1.106)	0.00235 (1.502)
Growth	0.0444 *** (13.13)	0.0424 *** (14.46)
Lev	−0.138 *** (−29.75)	−0.167 *** (−27.61)
Oc	0.00155 *** (3.686)	0.0136 *** (11.76)
Cash	0.0530 *** (6.231)	0.0634 *** (6.884)
Constant	−0.129 *** (−9.838)	−0.258 *** (−15.45)
Year	Control	Control
Ind	Control	Control
Inflection point	1.5044	5.6471
Observations	3504	3406
R-squared	0.393	0.410

Robust t-statistics in parentheses *** p < 0.01. Inflection point: 0.0192 ÷ 0.00170 ÷ 2 = 5.6471; 0.0170 ÷ 0.00565 ÷ 2 = 1.5044.

specifies the regression results grouped by different natures of equity, and the findings may further explain the variability in the impact of the nature of equity on the relationship between EPI and its economic performance. The results of the study show that the EPI of state-owned enterprises has a more significant impact on its economic performance compared to private enterprises. Firstly, the primary and secondary terms of EPI of state-owned enterprises are negatively and positively correlated with economic performance at the 1% significance level. It shows that there is a significant “U” curve relationship. Secondly, the primary term of EPI of private enterprises is negatively correlated with economic performance at the 1% significance level, but the relationship is not significant after the introduction of the secondary term. It shows that state-owned enterprises are the main force of green economy transition and Eco-investment in China. It is perhaps because state-owned enterprises have sufficient funds that they are more influenced by policy drivers, and that they have to undertake more social responsibility in the field of EPI. Therefore, the scale of EPI of such enterprises is large and tends to favor ex ante preventive investment in scientific and technological innovation, green production, and equipment acquisition. Although these expenditures are large and slow to take advantage of, they play an obvious role in promoting the reputation of enterprises. And once it passes the “inflection point”, it will significantly increase the enterprise’s economic performance and sustainable development capability. Secondly, unlike state-owned enterprises, private enterprises consider more from the perspective of resource occupation and output. Their EPI is mainly used for ex post remedial investment expenditures such as pollution control. These expenditures are not well integrated with the production and operation, so it cannot realize the green technological innovation and first-mover advantage of Porter’s hypothesis. Therefore, the positive effect on the economic performance of enterprises is not obvious. According to the calculation in Table 2, the mean value of EPI of state-owned enterprises and private enterprises are 0.279 and 0.249, respectively, which is much smaller than the “inflection point” of 1.5044 and 5.6471. It shows that both state-owned and private enterprises are on the left side of the “U” curve relationship, and EPI still has a negative impact on its economic performance. In particular, the difference between the mean value and the inflection point of private enterprises is even more significant, which means that it still takes a longer period of time for private enterprises to realize ecological autonomy in China.

4.3.3. Multiple Regression Analysis with the Introduction of Equity Balance Degree

Table 7. Model (2) regression results with the introduction of equity balance degree.

Variables	(1) ROA	(2) ROA
EPI	−0.00695 *** (−7.174)	−0.00683 *** (−7.002)
EBD	−0.000571 *** (−5.338)	−0.000567 *** (−5.345)
EPIB		0.000428 ** (2.141)
Size	0.0115 *** (25.24)	0.0115 *** (25.26)
Typ	−0.00279 ** (−2.010)	−0.00283 ** (−2.036)
State	−0.00714 *** (−6.613)	−0.00718 *** (−6.648)
Age	0.00359 *** (3.652)	0.00360 *** (3.669)
Growth	0.0424 *** (20.19)	0.0424 *** (20.21)
Lev	−0.147 *** (−41.36)	−0.147 *** (−41.31)
Oc	0.00395 *** (7.888)	0.00392 *** (7.830)
Cash	0.0562 *** (9.768)	0.0558 *** (9.692)
Constant	−0.174 *** (−18.01)	−0.174 *** (−18.05)
Year	Control	Control
Ind	Control	Control
Observations	7601	7601
R-squared	0.377	0.377

Robust t-statistics in parentheses *** p < 0.01, ** p < 0.05.

specifies the regression results after the introduction of the equity balance degree. The equity balance degree is the key to corporate internal governance, and its level will directly affect the enterprise’s economic performance. When the equity balance degree is low, controlling shareholders, senior management, and the board of directors will hold the power to make major business decisions. When the equity balance degree is high, the small- and medium-sized shareholders have a certain regulatory role in the business decision-making, and its constraints are stronger. The results show that the main variables and EPIB passed the significance test after the introduction of the interaction term EPIB. The regression coefficient of EPIB is 0.000428, with a t-value of 2.141, and it is significant at the 1% level. It demonstrates that the higher the equity balance degree, the higher the negative effect of EPI on its economic performance. It represents that the dispersion of the firm’s shareholding structure will have a greater negative impact effect, and Research Hypothesis 2 is statistically verified.

4.3.4. Multiple Regression Analysis of Grouped Samples with the Introduction of Equity Balance Degree

In order to further investigate the differences in the impact of introducing equity balance degrees for enterprises with different equity natures, this study conducted a grouped-sample multiple regression analysis. The results of the study are specifically shown in

Table 8. Subgroup regression results after introducing equity balance degree.

Variables	State-Owned Enterprises		Private Enterprises
	ROA	ROA	ROA	ROA
EPI	−0.00215 ** (−2.022)	−0.00185 * (−1.712)	−0.0115 *** (−7.557)	−0.0120 *** (−7.788)
EBD	−0.000316 * (−1.649)	−0.000337 * (−1.722)	−0.000614 *** (−4.809)	−0.000580 *** (−4.647)
EPIB		0.000297 (1.131)		0.000883 *** (3.308)
Size	0.00918 *** (16.39)	0.00920 *** (16.38)	0.0146 *** (18.79)	0.0146 *** (18.82)
Typ	−0.00382 ** (−2.059)	−0.00386 ** (−2.081)	0.000556 (0.279)	0.000583 (0.293)
Age	0.00162 (1.114)	0.00166 (1.141)	0.00335 ** (2.434)	0.00337 ** (2.445)
Growth	0.0409 *** (13.08)	0.0409 *** (13.07)	0.0407 *** (14.83)	0.0408 *** (14.90)
Lev	−0.139 *** (−31.32)	−0.139 *** (−31.24)	−0.164 *** (−28.58)	−0.164 *** (−28.60)
Oc	0.00190 *** (4.250)	0.00189 *** (4.200)	0.0132 *** (12.50)	0.0132 *** (12.46)
Cash	0.0553 *** (6.796)	0.0550 *** (6.744)	0.0603 *** (7.291)	0.0599 *** (7.248)
Constant	−0.124 *** (−9.914)	−0.125 *** (−9.933)	−0.246 *** (−15.49)	−0.246 *** (−15.51)
Year	Control	Control	Control	Control
Ind	Control	Control	Control	Control
Observations	3857	3857	3744	3744
R-squared	0.380	0.380	0.404	0.405

Robust t-statistics in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1.

, which indicates that the moderating effect of the equity balance degree is significantly different between state-owned enterprises and private enterprises. Firstly, the relationship between the interaction term EPIB and economic performance as measured by ROA is not significant in state-owned enterprises. It indicates that the impact of state-owned enterprises’ EPI is less influenced by the equity balance degree. Or it may be related to the fact that state-owned enterprises are more driven by government policies and their proactive participation is higher. Secondly, the relationship between the interaction term EPIB and its economic performance as measured by ROA is positively related at the 1% significance level in private enterprises. It indicates that the equity balance degree moderates the private enterprises’ EPI to a certain extent.

According to the analysis above, R-squared is in the range from 0.377–0.410. The reasons that may cause a small R-squared value are as follows: (1) The economic performance of enterprises is not only affected by EPI but also by multiple factors such as market, regulations, competition, etc., which may lead to lower R-squared value of the regression model. (2) This paper focuses on the effect of EPI on firms’ economic performance under the moderation of equity balance degree, i.e., the effect of X on Y. In this case, t-values are preferred for being able to test the significance of the effect of each independent variable. It passed the test of significance of t-value, which ensures the reliability of the results.

4.4. Robustness Test

To further validate the stability of the model’s multiple regression structure, this study uses two approaches for validation. Firstly, this paper adopts the way of replacing the explanatory variables for validation. The TQ was validated by replacing the original economic variable ROA, which obtained research conclusions that were generally consistent with this study. Secondly, this paper adopts the way of deleting extreme years for validation. The outbreak of Novel coronavirus pneumonia in the early 2020s had a profound impact on the global economy. The epidemic led to a slowdown in economic activity, disruptions in supply chains, and a decline in market demand, with significant impacts on the financial situation and operating models of enterprises. When faced with economic uncertainty, firms often adopt cutting costs and expenditures in reaction, especially reducing environmental investments. This reallocation of resources may distort the impact of EPI on economic performance in regular times, which could affect the results of the empirical analyses. Therefore, this paper takes the approach of excluding data from 2020–2022 to re-empirically analyze the research hypotheses. The conclusions obtained are basically inconsistent with this study. It indicates that the robustness of the conclusions is more reliable.

5. Discussion

Enterprise is a key force for promoting ecological governance. It is not only a consumer of resources and an emitter of pollutants, but it is also a producer of wealth. It deserves to undertake the main responsibility for ecological environmental protection. However, the reality is that most companies tend not to be self-driven toward EPI based on the vision of resource occupancy and output.

Compared with previous studies, this paper presents a fresh perspective for driving EPI development from the aspect of equity structure. Existing studies mostly start from the macro and industry level and rarely discuss how to expand the scale of EPI from the enterprise’s level and combine it with China’s market share reform. The current study comprises how to improve the driving forces of enterprises’ EPI, and how to realize the effective transformation of a low-carbon economy and green society. There were three primary aims of this study: (1) to determine whether significant relationships between EPI and its economic performance, (2) to clarify the moderating effect of equity balance degree, and (3) to prompt policy implementation based on state-owned and private enterprises. To sum up, the main findings of the study are as follows:

(1) The relationship between EPI and its economic performance is a “U” curve, and there is an obvious inflection point with a certain lag period. The results of the study show that the left side of the “U” curve indicates the impact of EPI on its economic performance is negative. The larger the scale of a firm’s EPI, the lower its economic performance will be. However, when the relationship over the inflection point reaches the right side of the “U” curve, the impact will be positive. The larger the scale of a firm’s EPI, the higher its economic performance will be.

(2) Eco-autonomy is related to the “U” curve, and most Chinese companies are still on the left side of the “U” curve with a large gap from the inflection point. When the relationship is on the left side of the “U” curve, its economic performance decreases and enterprise self-motivation is insufficient. The willingness to invest in environmental protection is mainly policy-driven. When the relationship is on the right side of the “U” curve, the economic performance improves enterprise self-motivation of EPI, and the corporate Eco-autonomy is effectively achieved. In the short term, a firm’s EPI has a significant negative impact on its economic performance with a certain lag and a significant negative effect on its performance in the 2nd year. At present, the EPI scale of Chinese enterprises will be on the left side of the “U” curve for a long period, and the impact of EPI on its economic performance is still dominated by the negative effect, in which the mean value of private enterprises has a bigger gap from the inflection point.

(3) The equity balance degree can regulate the negative impact of EPI on its economic performance to a certain extent. The research results show that the equity balance degree has a certain moderating effect on the negative impact on the left side of the “U” curve. The more concentrated the equity, the greater the positive moderating effect. Therefore, enterprises can better regulate the negative impacts of EPI by establishing a good equity balance system to achieve a win–win situation for both environmental protection and economic development.

(4) The moderating effect of the equity balance degree is significantly different between state-owned and private enterprises, especially for private enterprises, which is more obvious. The results of the study show that the relationship between the interaction terms EPIB and ROA is not significant in state-owned enterprises. However, the relationship between the interaction terms EPIB and ROA is positively correlated with each other at the 1% significance level in private enterprises. It indicates that the moderating effect of the equity balance degree on EPI in private enterprises is higher than in state-owned enterprises.

6. Policy Implications

The main contribution of this study is that the impact of EPI on the economic performance of Chinese enterprises remains on the left side of the “U” curve, with a significant gap from the inflection point. It indicates that China’s environmental protection activities will continue to remain in the stage of “government governance” for a long period, with fewer corporate Eco-autonomy activities. The government is still the main promoter of environmental protection in China. In order to further increase the scale of EPI for Chinese enterprises, this paper puts forward the following suggestions in response to the above research findings:

(1) The government still needs to reinforce policy subsidies, tax incentives, and other environmental protection-promotion measures to encourage Chinese enterprises to increase the scale of EPI. At present, the implementation of China’s Ecological Protection Compensation Ordinance has greatly promoted the willingness of enterprises to EPI. According to the findings, the impact of EPI on economic performance will remain predominantly negative for a long period in China, resulting in EPI decisions to be more cautious and less self-driven by enterprises. Therefore, exchequer-based transfer payment, vertical and horizontal compensation, and market-based compensation are the main methods of environmental policy subsidies in China [47], and they are still the key driving forces to help companies cross the “inflection point effect” now.

(2) The government should focus on private enterprises with high equity balance degree and high pollution levels to develop differentiated environmental incentives and regulatory policies. Considering that the higher degree of equity balance and the more dispersed of shareholdings in private enterprises, the lower motivation of EPI activities, the government should implement key regulations for such enterprises, strengthen environmental governance policies to reduce their polluting behavior from the beginning, and formulate targeted environmental incentives to stimulate the market economy in the field of EPI.

(3) The government should encourage state-owned enterprises to increase the scale of ex ante preventive investment in environmental protection and provide some policy incentives for ex ante preventive investment. According to the findings of this paper, state-owned enterprises are closer to the inflection point of EPI. It indicates that the positive effect is realized more quickly. This is because ex ante preventive investment is beneficial to help enterprises achieve technological innovation and first-mover advantage in Porter’s hypothesis.

(4) The government should reinforce the obligatory requirement for listed companies to disclose eco-friendly information. It contributes to the promotion of corporate reputation and social recognition, as well as positive effects between EPI and ROA. However, this study found that the environmental information published by listed companies in China is poorly standardized, the readability of the information is limited, and the categorization of the information is confusing in the process of data collection. Therefore, the government should mandatorily require listed companies to disclose their eco-friendly information and regulate the content of information. It is required to regularly publish true, accurate, and complete information to the public.

(5) The government should strengthen national education on the concept of ecological environmental protection and encourage enterprises to establish an Eco-autonomy mechanism. From the conclusion of the study, China is still far from the advanced stage of ecological governance (corporate Eco-autonomy) in the short term. In the future, it may be possible to learn from the concept of German environmental education, implanting the concepts of environmental consciousness and sustainable development into national education, which may help enterprises achieve Eco-autonomy.

7. Limitations

This study also has certain limitations. Firstly, all the data in this study are based on Chinese A-share listed companies as the research sample. However, in the process of data collection, it was found that many enterprises did not continuously disclose environmental information, or the content of the disclosed information was seriously incomplete, resulting in a larger number of enterprises failing to be included in the scope of the research data. It may lead to a reduction in the accuracy of the research conclusions. Secondly, the impact of EPI on its economic performance is influenced by a combination of factors, such as corporate reputation, media attention, the level of regional marketization, and the regional rule of law environment. However, due to the limited data collection, this study was not able to include the above factors into the study. Future studies may be able to include the above factors when information collection is more effective.

8. Conclusions

In conclusion, our findings show that the U-shaped curve exists between the enterprises’ EPI and their economic performance. The equity balance degree mitigates its negative effect and diverse influence in state-owned and private enterprises. Accordingly, it prompts the government’s formulation of reasonable environmental policies according to the changes in the shareholding structure. The next implication is to combat “false information” by field research and promoting accurate information through cross-section collaborations in order to enhance the enthusiasm of enterprises’ EPI and help to realize the ideal state of enterprises’ ecological autonomy.